On a recent Wednesday night, Annie Scalambrino, 20, flipped on MTV to watch one of her favorite shows, The Real World--only to find nonstop DirecTV ads. "I was really thrown off," she recalls. The reason: her satellite provider (DirecTV) and the media company it rents channels from (Viacom) couldn't agree on how much they should be paying each other, which meant that viewers of any Viacom channel--Nickelodeon, Comedy Central, MTV and others--were left in the dark. (The dispute has since been resolved.)
Sound familiar? It should. In the first 6 months of 2012, there have been 22 broadcast blackouts--up from 15 in all of 2011 and just four in 2010, according to the American Television Alliance. Meanwhile, fans are angry, cable and satellite prices are climbing, and Congress is debating cable-TV reforms. Here's why this is happening and why it's likely to get worse.
1. THE CABLE-TV BUSINESS IS TOUGHER THAN IT USED TO BE
According to the 1992 Cable Act, media companies like Disney can legally charge a fee to providers like Comcast for carrying their cable channels. In the past, Disney would forgive these retransmission fees if Comcast agreed to carry its new channels, like ESPN, since building an audience helps media companies attract advertising dollars. (That's a major reason so many cable channels were launched in the '90s and '00s.) Now that the new-channel market is saturated, however, media companies are asking for "retrans" fees instead.
But most providers and customers aren't used to footing that bill. "That puts a whole new level of stress on the TV ecosystem," says Barton Crockett, a media analyst at Lazard Capital Markets. Media companies don't want to lose revenue; providers don't want to raise prices and lose customers. When neither side budges, viewers get blackouts. (TIME's parent company, Time Warner, operates some cable channels; provider Time Warner Cable spun off in 2009.)
2. CHANNELS ARE SOLD BY THE BUNDLE--WHETHER YOU LIKE IT OR NOT
Media companies have historically forced cable and satellite providers--and their customers--to accept channels in bundles; if they want to carry a popular network like MTV, they must also air less popular networks, like MTVU. To offset retrans-fee-related increases, providers are challenging media companies to offer an la carte option, allowing customers to pay for channels individually and saving themselves money. "Taking the movie channel Epix off the table [in the Viacom negotiations] saved us about $500 million," says Derek Chang, DirecTV's executive vice president of content and strategy.
3. NO MATTER WHAT, AMERICANS WON'T STOP PAYING FOR CABLE TV
Despite the rise of Netflix, Hulu and other cable alternatives, "87% of people who have a TV set still subscribe to cable and satellite," even though fees have increased 60% over the past eight years, says media analyst Bruce Leichtman. In other words, Americans are a long way from cutting the cord, and media companies and providers know it. "You lose a few channels for a few days," says Lazard's Crockett. "That's not enough to stop the love affair Americans have with TV."